One can understand why Nick Clegg wants to brush the Barnsley by-election under the carpet. Coming sixth behind an independent and the racist BNP is a psychological trauma that doesn't bear much thinking about. In years to come, when Liberal Democrat fortunes have revived, this result will still be remembered.

There are plenty of extenuating circumstances – not least that the party scarcely ran a campaign. From down the road in Leeds the impression was of a decent candidate, Dominic Carman, operating almost alone. Compared with the bombardment of pleas to go and help in Oldham East and Saddleworth for two months leading up to that by-election, there was scarcely a whisper from South Yorkshire. In truth, Old and Sad had stretched the Lib Dems' resources beyond the limit.

Needless to say, more effort might have been made to garner the 500 votes needed to claim a semi-respectable fourth place, but the significance of "losing" a second place earned on just 17% of the vote should not be exaggerated. The Lib Dems' historical strength in byelections had everything to do with protest. Government parties always do badly in opposition safe seats. Labour wouldn't have lost Barnsley Central if Gordon Brown was still driving the economy into the gutter. The rest were always scrabbling around to be least-bad also-rans.

The lacklustre campaign from all sides and pitiful turnout once again highlighted the harm caused by first-past-the-post. If everyone knows the result in advance, no candidate will be motivated to go out of their way for constituents in the way that they do in marginal seats. It is no coincidence that the last MP thought he could get away with taking voters for a ride.

Still, the Lib Dems came sixth. Sixth! Little wonder that Clegg declared that the only way is up. But where is the recovery going to come from? Losing protest votes – or those who thought the Lib Dems were to the left of Labour – cannot be regretted by a party with serious ambition (with the caveat that disliking authoritarianism or the Iraq war is not a leftwing position; it is a liberal one).

The Lib Dems have a more worrying problem, however. For the moment they have also lost the support of many who thought they were to the left of the Conservatives. The most galling aspect of the Barnsley Central poll was that Lib Dems were punished more for associating with Tories than the Tories were themselves.

Clegg's desire to take responsibility and show discipline in government is understandable – and a Barnsley byelection is not a sensible way to measure the merits of that position. But that strategy has led the Liberal Democrats into a curious dilemma. How can any party expect to attract support if it does not advertise its successes – or even articulate its position?

Thousands of voters in Barnsley Central are benefiting from progressive Lib Dem policy, having been lifted out of income tax. No one believes the Tories would have done that on their own. Labour wouldn't have done it either. In 13 years Labour did little to redistribute tax burdens away from the poor – indeed, the 10p rate debacle did quite the opposite. So here is an important good news story. The Lib Dems' willingness to compromise has led to positive outcomes for the least advantaged. That is something that could be sold to voters.

Dominic Carman could have taken to the streets of Barnsley with a message that the Liberal Democrats are stopping the worst excesses of the Tories, while Labour sits idly by. Without Lib Dems, there'd have been fewer cuts to the defence budget and more to environment programmes. Again, this hasn't just clipped Tory wings; it's reversed Labour's lame record too. A more bullish line would not have won Barnsley for Carman, but he'd have done better. Trying to defend the coalition's handling of the economy in South Yorkshire was always inviting a lost deposit. The couple of thousand who believed it voted blue.

In government the Liberal Democrats are doing alright. An article starting with psychological trauma wouldn't be complete without acknowledgement of the tuition fees fiasco, but beyond that there's plenty to be proud of. The strategic failures have been in communicating that message.

The Lib Dems certainly can't afford to sink the ship, but it's more stable than some seem to fear. The government will not collapse just because Lib Dems occasionally declare that they're not Tories; that they are toning down Tory policy and making a Tory government do progressive things. That is why coalition government is a good idea in the first place. Why is Nick so reluctant to say so?